With a week to go until the chancellor Jeremy Hunt stands to deliver his 2024 Spring Budget, the Daily Update picks out some key asks that might offer a timely boost to the UK’s trade community.
As many observers have noted, this Budget is seen as the last major opportunity for the chancellor to deliver a meaningful fiscal boost to the economy ahead of a general election that is due to take place within the ten months. The pressure is therefore on to pull several rabbits from his hat.
But which of these potential rabbits would most appeal to the international trading community in the UK?
MSME funding
In a letter written to the chancellor earlier this month, Marco Forgione, director general of the Institute of Export & International Trade (IOE&IT), made three clear requests.
The first was to use whatever funding was available to boost the prospects for the UK’s micro, small and medium-sized enterprises (MSMEs).
“The support required by small businesses to trade internationally should be tailored to their specific needs. Small businesses face highly specific challenges, particularly around funding.
“Since the withdrawal of the UK Tradeshow Programme, there is an opportunity to utilise the funding for tailored government support to address the needs of MSMEs.
“This could be provided by expanding export finance options, creating tax incentives for smaller businesses and establishing new international trade apprenticeship programmes.”
Will he cut taxes and, if so, which ones?
The headline speculation in recent months has been not so much whether Jeremy Hunt will cut taxes, but rather which ones he will cut and by how much.
There’s nothing that cheers a ruling party, regardless of political stripe, like being able to go into an election with a clear “stick with us, the plan is working” narrative. The current government is no exception.
Along with the discussion of which taxes might be reduced next week has been discussion on how much “fiscal headroom” Hunt has to play with. Although, by some accounts, that headroom has reduced, speculation on likely cuts has not gone away, with talk of cuts to inheritance tax, national insurance and income tax, as well as plans to freeze fuel duty.
But in his letter, Forgione called for a different focus.
“MSMEs face high costs of setting up their exporting capabilities and are deterred from getting started on their export journeys. One of the financial barriers that can adversely impact MSME growth is the £85,000 VAT threshold.
“Since MSMEs have lower capacity, burdensome VAT compliance is more expensive and puts a strain on resources. Raising this threshold could incentivise MSMEs to grow their turnover increase their exports.”
Forgione added that creating tax incentives, such as credits for MSMEs looking to export, is also key to addressing the high entry barriers for smaller businesses to begin exporting.
“A joint government and industry committee of experts which focuses on supporting small businesses could be formed to award grants for initiatives that aid reduce the trade barriers these businesses face.”
Addressing the skills gap
Away from the fiscal changes that the chancellor may or may not introduce, Forgione highlighted the vital role that skills and education play in helping to encourage more firms to export more.
“Addressing the skills gap is key for MSMEs to flourish in international trade. In a recent poll of IOE&IT members, 60% of respondents stated that greater expertise in international trade is essential for them to increase exports, while 40% said a need for employees skilled in customs procedures was important.
“Furthermore, 20% agreed that export training and support would enable their business to export more.”
This, says Forgione, shows that easing the opportunities for MSMEs to bridge the skills gap is crucial for them to successfully take their business overseas.
“Implementing funding streams for further educational programmes, such as regional training clusters, in partnership with training organisations, offers an opportunity to address these skills shortages in key regions.”
Encouraging the use of digital trade solutions
In the week that IOE&IT was a signatory to an agreement on the need to encourage greater adoption of digital trade globally, Forgione also called on Jeremy Hunt to do more to encourage the adoption of digital trade solutions in the UK. He cited the need for greater agility in supply chains, not least in the face of increasing risks and growing uncertainty.
“This need for agility calls for increasing modernisation of trade through technology. This includes increasing visibility across supply chains to allow operators to address challenges in every step of the chain, estimate risks and act accordingly.
“Almost a third of IOE&IT members recently polled said governments should promote exporters’ involvement in international supply chains via digital trade solutions.”
While research and IOE&IT-led pilot schemes have repeatedly shown the efficiencies and cost benefits from adopting these new trade technologies, industry has yet to be “incentivised” to develop appropriate technical infrastructure to make it available in the right format at scale.
“It is critical to improve funding for businesses to adopt digital trade technology solutions, to allow them to save costs and have visibility on how unforeseen circumstances can affect their business.
“In order to make these solutions most effective, third-party interoperability of these systems is vital. The UK has a real opportunity to lead conversations globally on the creation of these interoperable systems.”